Emulex: Fiscal 4Q09 Financial Results

Emulex Corporation announced results for its fourth fiscal quarter ended June 28, 2009.

Fourth Quarter Financial Highlights

• Total net revenues of $79.3 million
• Host Server Product (HSP) net revenues of $62.8 million, or 79% of total net revenues
• 8Gb/s Fibre Channel Host Bus Adapters (HBAs) net revenues increased over 80% sequentially, accounting for approximately 15% of HBA revenues during the quarter
• Embedded Storage Product (ESP) net revenues of $16.4 million, or 21% of total net revenues
• GAAP gross margin of 62% and non-GAAP gross margin of 68%
• GAAP operating loss of $9.7 million, or 12% of total net revenues, and non-GAAP operating income of $9.4 million, or 12% of total net revenues
• GAAP loss per share of $0.06 and non-GAAP diluted earnings per share of $0.09
• Cash, cash equivalents and investments of $302.4 million, essentially flat with the prior quarter
• Inventory turnover of 11.4 times

Business Highlights

• Announced two new OEM design wins for Emulex OneConnect 10Gb/s Enhanced Ethernet Universal Converged Network Adapters (UCNAs) expanding the number of design wins to 14 platforms
• Demonstrated the capabilities of the Emulex OneConnect 10Gb/s Enhanced Ethernet (UCNAs), including TCP/IP, iSCSI and Fibre Channel over Ethernet (FCoE) connectivity at Interop Las Vegas
• Announced the Emulex LightPulse FCoE Converged Network Adapters (CNAs) are available and certified for HP ProLiant DL100, DL300 and DL500 series servers and HP StorageWorks MSA, EVA and XP arrays running Windows, Hyper-V, VMware and Linux operating systems
• Announced Emulex LightPulse HBAs and FCoE CNAs are fully supported in Microsoft System Center suite of products
• Announced Emulex common LightPulse FCoE CNA and Fibre Channel HBA drivers have been certified with Oracle Enterprise Linux 4.8
• Announced the award of two new Original Equipment Manufacturer (OEM) design wins for Emulex LightPulse Fibre Channel HBAs, including the industry’s first 16 Gb/s Fibre Channel win
• Emulex was awarded the 2009 Storage Magazine Editors Choice Award for the enterprise scalability, maximum SAN performance, superior quality and reliability of its LightPulse 8Gb/s family of Fibre Channel HBAs
• Announced Emulex LightPulse Fibre Channel HBA support for HP StorageWorks 6400 and 8400 Enterprise Virtual Arrays
• Announced availability of LightPulse 8Gb/s Fibre Channel CIOv Expansion Card, which is optimized for use with IBM’s new BladeCenter HS22 Blades

Financial Results
Fourth quarter total net revenues were $79.3 million, a sequential increase of 1% and a decrease of 30% from the comparable quarter of last year. Fourth quarter GAAP net loss was $4.5 million, or $0.06 per share, compared to GAAP net loss of $50.4 million, or $0.61 per share, reported in Q4 of fiscal 2008 and net loss of $6.0 million, or $0.07 per share, in Q3 of fiscal 2009. Non-GAAP net income for the fourth quarter, which excludes amortization of intangibles, stock-based compensation, and severance along with associated costs, as well as the costs associated with Broadcom’s unsolicited takeover proposal and related litigation costs, was $7.6 million, or $0.09 per diluted share. Non-GAAP net income per diluted share increased 80% sequentially from $0.05 per diluted share and decreased 59% from $0.22 per diluted share reported in Q4 of fiscal 2008. Reconciliations between GAAP and non-GAAP results are included in the accompanying financial data.

President and CEO Jim McCluney commented: “Our fourth quarter results reflect a solid quarter of execution across the business. In addition to achieving revenue results at the high end of our April guidance, we continued to rack-up design wins and awards for both our LightPulse HBAs and OneConnect UCNAs during the quarter. I’m particularly pleased with the performance in our Host Server Products, as we saw our 8Gb/s Fibre Channel HBA revenue expand sequentially, reaching approximately 15% of our board-level product net revenues. Furthermore, based on our strong sequential growth in HSP revenues of over 6%, we gained share over our nearest competitor during our fourth quarter.”

Mr. McCluney added: “We also continued to deliver on our Universal Converged Network Adapter strategy that we announced in February. We secured two additional 10Gb/s Ethernet OEM design wins, taking the total wins so far to 14.”

“Our ability to out-execute the competition was clearly demonstrated during the quarter and I’m looking forward to carrying that momentum into fiscal 2010,” concluded McCluney.

Business Outlook
Although actual results may vary depending on a variety of factors, many of which are outside the Company’s control, including the economic uncertainty resulting from the current economic downturn and related disruptions in global credit and equity markets, Emulex is providing guidance for its first fiscal quarter ending September 27, 2009. For the first quarter of fiscal 2010, Emulex is forecasting total net revenues in the range of $78-$82 million. The Company expects non-GAAP gross margin will be approximately 66% and non-GAAP earnings per diluted share could amount to $0.03-$0.06 in the first quarter. On a GAAP basis, Emulex expects a gross margin of approximately 60% and diluted first quarter loss per share of $0.06 – $0.09 per diluted share. GAAP estimates for the first quarter of fiscal 2010 reflect approximately $0.12 per diluted share in expected charges arising primarily from amortization of intangibles, stock-based compensation, and costs associated with Broadcom’s unsolicited takeover proposal and related litigation costs.